Move comes after China stopped rare earth shipments to Japan for two months

When it
comes to hybrids, Toyota sells a significant
number of its Prius vehicles globally (the company also sells hybrid
variants of conventional models). As a result of its large stake in the hybrid market,
Toyota has announced that it is developing a new
electric motor for its hybrid and electric vehicles that will cut its
dependence on China for rare earth materials.

The move comes after Japan and China had a diplomatic issue that led to China
cutting any exports of rare earth to Japan for two months. China currently
produces about 97% of the rare earth materials exported all around the world.
The rare earth is needed in the electronics industry for making raw components.

China isn't the sole source for rare earth materials, however. The Associated Press reports that the U.S.,
Canada, and Australia all have sources of rare earth materials as well, but
they stopped mining the rare earth in the 1990's because it was cheaper to
source if from China. China has about 30% of the total supply of rare earths in
the world.

Toyota spokes man Paul Nolasco said, "Toyota is always looking for a
reduction in resources and in terms of costs."

According to analysts, the production of EVs and hybrids is still low enough
that a loss of rare earth materials for a few months makes for little
short-term risk. However, with the number of hybrids and EVs under development
this could change in the future making it easy for China to hold rare earth
materials hostage and tighten supply to drive prices up.

China is
already reducing the amount of rare earths that it ships with production for
2010 reduced by 30% compared to the previous year.

Analyst Ryoichi Saito from Mizuho Investors Securities said, "This isn't a
major issue right now, but as these types of cars become more popular, it
becomes a big risk if supply is limited or cut off."

Not only will they -- some are already in the process of being reopened. Molycorp, for example, has already completed the paperwork needed to restart production at a rare-earth mine in Mountain Pass, California. See http://www.technologyreview.com/energy/26980/?mod=... for the details.

It didn't make financial sense to mine for rare earths in the U.S. lately, as China exported more than enough at prices that were lower than what was economically viable for U.S. firms. But now, with China reducing exports of rare earth elements coupled with an increased demand worldwide, it was inevitable that mines here (and elsewhere) would reopen.

It's economically viable to drill for oil here and do many other things. However when the federal government seizes state lands where resources are and designates them nature preserves, nothing can happen on it. Look at the frozen wasteland they just made a polar bear habitat.